Eupraxia Pharmaceuticals Inc.("Eupraxia" or the "Company") (TSX: EPRX), a Phase 2 clinical-stage biotechnology company with an innovative drug delivery technology platform, today announced that it has entered into a contingent convertible debt agreement (the "Agreement") with Silicon Valley Bank ("SVB") and concurrently drew down in full the $10 million principal amount under the Agreement. In addition, the Company announces the conversion of approximately $6.0 million of outstanding indebtedness into common shares of the Company ("Common Shares") pursuant to certain convertible bridge loans made to the Company prior to its March 2021 initial public offering (the "Pre-IPO Bridge Loans").
"We are extremely pleased with the continued fortification of the Company's balance sheet. With a fully funded Phase 2 program for our lead product candidate, EP-104IAR, this additional capital from a trusted and supportive investor provides us with greater financial and operating flexibility to broaden our development plans for EP-104IAR and the underlying platform technology," said Dr. James Helliwell, Chief Executive Officer of Eupraxia. "The funds will also help us identify additional therapeutic targets to expand our pipeline of locally delivered, extended-release drug candidates."
A summary of the key terms of the Agreement is as follows:
$10 million in principal, which was drawn down at signing of the Agreement.
Term of 36 months or 48 months upon SVB's election.
Interest rate per annum of the greater of 2.45% and Canadian prime rate, requiring monthly interest payments, and a payment in kind at a rate of 7% per annum, capitalized monthly, which will be settled on maturity or conversion.
Subject to the terms and conditions of the Agreement, SVB may elect to convert the principal amount of the convertible debt and the accrued and unpaid interest thereon into Common Shares at a conversion price equal to $5.68 per Common Share, representing a 40% premium to the average closing price of the Common Shares on the Toronto Stock Exchange (the "TSX") for the 20 trading days prior to the date of the Agreement. The conversion price of the accrued and unpaid interest will be subject to the minimum pricing requirements of the TSX, to the extent applicable, at the time of conversion.
The Company will have the right (the "Call Right") to call the convertible debt by paying to SVB an amount equal to:
125% of the principal amount of the convertible debt (less principal amounts previously repaid), if the Call Right is exercised on or before the 18 month anniversary of the date of the Agreement; and
150% of the principal amount of the convertible debt (less principal amounts previously repaid), if the Call Right is exercised after the 18 month anniversary of the date of the Agreement,
in either case together with all accrued and unpaid interest on the principal balance of the convertible debt. If the Call Right is exercised by the Company, SVB will retain certain lookback rights in the event the Company subsequently announces its topline data from its Phase 2 clinical study or the Company enters into an agreement to be acquired in the 12 months following the exercise of the Call Right.
The Company has agreed to grant SVB a security interest in all of its assets, excluding its patents and other intellectual property, as security for its obligations under the Agreement. The Company is required, on or prior to June 30, 2022, to raise additional net new capital, as defined in the Agreement, in the aggregate amount of $10 million. This net new capital can originate from, but is not restricted to, a variety of sources as outlined in the Agreement and can include up to $5 million in reduced project expenses.
The Agreement is subject to final approval of the TSX.
"This debt agreement with Eupraxia demonstrates our confidence in the Company's leadership team, their broader business strategy, and their ability to advance EP-104IAR as a potential treatment for pain due to osteoarthritis of the knee," said Anne Woods, Managing Director of Life Sciences...
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